In: Accounting
Falcon is self-employed and runs her own business. Falcon’s trading profits for the year 2014/15 were £5,100. Profits per Falcon’s financial statements were £5,700. Falcon also had earnings of £9,500 from part-time employment. Which of the following combinations of National Insurance contributions must Falcon pay in 2014/15?
a) Class 1 primary, Class 1 secondary
b) Class 1 secondary, Class 4
c) Class 1 primary, Class 2
d) Class 4, Class 2
Combinations shown in C) class 1 primary, class 2 holds true.
Any contribution are paid by employer and employees classified in CLASS 1. Being an employee Falcon must pay contribution, and any employee contribution is referred as PRIMARY CONTRIBUTION.
Falcon is also a self-employed. As a self-employed person he has to pay contribution. They are due regardless of trading profits or loss. Falcon's contribution as a self-employed comes under CLASS 2.
Combination 1 is not correct because class 1 secondary is only applied when employer contribution is paid. Here it has not been mentioned, also employer contribution must be paid by employer it is not been paid by Falcon .
Combination 2 is not correct for the presence of class 1 secondary, ( explanation mentioned before) and for class 4. In class 4 contribution only calculated with income tax at the end of the year based on figure supplied on the SA100 tax return for self employed .Here figure supplied on SA 100 tax return is not found.
Combination 4) It is hold false due to the presence of class 4, [explanation on class 4 mentioned already].